For years a strategic ally in the containment of Soviet Communism, Turkey has now become a bulwark against dictators, terrorists and Islamic radicals.

In this it is aided by geography. With neighbors like Iraq, Syria and Iran, it seems an enclave of relative stability in a zone of political earthquakes.

But those with an ear to the ground are beginning to hear rumblings of discontent in Turkey itself, a sprawling democracy of 60 million people, most of them Muslims.

Its economy is going haywire. Its politics are mired in personal power struggles. A Kurdish insurrection is raging in the southeast. And an Islamic fundamentalist movement is spreading through the shantytowns that encircle Ankara and Istanbul.

Many diplomats and Turks say they believe that this strategically placed country is at its most decisive turning point since 1923, when Mustafa Kemal Ataturk founded the republic on the ashes of the Ottoman Empire.

Acknowledging some of the problems and defensively rebutting others, top officials from the Prime Minister and the President on down are sanguine about the future one moment and alarmist the next.

Flashing the sly smile of blackmail, they warn that it is now up to the West to help preserve Turkey's security.

In particular, the officials say, the European Union must admit Turkey into its customs union, the antechamber to full membership, at a meeting set for some time after March 6. If not, they assert, the rebuff will add fuel to the popular conviction that the West is rejecting Turkey out of religious bias.

That conviction is hammered home in television pictures of Bosnia and Chechnya, conflicts in which Muslim populations are being crushed. It feeds a rapidly growing, anti-Western, fundamentalist movement. Already, polls indicate, the political party raising the fundamentalist banner is the strongest in the country.

The Prime Minister, Tansu Ciller, said in an interview that there were "whisperings" of discontent in February when the threat of a Greek veto upset an arrangement for Turkey to sail into the customs union unopposed.

"People were very vocal, saying that Europe will never accept Turkey because we happen to be a Muslim country," Mrs. Ciller said. "If our European friends reject us on the grounds that we come from a different religion, then they will make themselves a Christian club, and there will be a confrontation in the world."

With the end of the cold war, Turkey lost its strategic position as a NATO member defending Europe's southern flank against Soviet Communism. Instead it had hopes of becoming the vital middleman, exporting goods to the new hinterland of Turkic republics to the east and bringing out the untapped resources of oil and natural gas.

Now, with conflicts multiplying in Azerbaijan and elsewhere, the east conjures up danger as well as riches. Turkey is recasting itself as a buffer state and as a bulwark, only this time against revolutionary Islam. Indeed, Willy Claes, the Secretary General of NATO, asserted recently that fundamentalism posed as big a threat to the West as Communism once did.

The United States State Department has heightened its diplomacy, lobbying actively on Turkey's behalf in European capitals and appointing a special Presidential envoy, Richard Beattie, to work on the 21-year-old Cyprus dispute between Greece and Turkey.

"We haven't paid enough attention to Turkey," said Assistant Secretary of State Richard Holbrooke, who has visited the region several times. "This area -- southern Europe, the Balkans, the eastern Mediterranean, the Caucasus -- this is the most volatile portion of the world today."

Turkish officials play to the fears of upheaval and a new global religious schism, which enhances its status as a broker.

"In this part of the world, there are two models," Mrs. Ciller said in the Prime Minister's mansion overlooking Ankara. "One is the Khomeini model of Iran and the forces of the uprising trend of radicalism. The other is Turkey, with the first woman Prime Minister, the only country among 52 Muslim countries that is secular and democratic."

She continued, "If Turkey is rejected or if my people feel we are rejected, fundamentalism will find a fertile land to flourish in, and then this will be the last fortress which will fall."

The fundamentalist rise is already very real. The Welfare Party, a militant Islamic group, has taken control of local governments in Ankara, Istanbul and other municipalities. The party offers subsidized bread, health clinics, hostels for students and other services that the exhausted old order cannot supply.

Many Turks, especially those in the middle class, are worried and angered by some of its actions and pronouncements: closing shelters for battered women, trying to segregate buses by sex, attacking ballet as a degenerate art form and advocating but disavowing a proposal after it created a storm -- that Istanbul's ancient walls be torn down as a symbol of Byzantine Christendom.

"If they come to power -- and I think they will -- then we will have to leave," a young scientist said, sitting with his American-born wife in a restaurant overlooking the Bosporus. "There'd be no room for people like us here." Economy Boom, Then Bust, Now Disillusion

Turkey's most immediate problem is economic. After a boom in the late 1980's under Turgut Ozal, who was Prime Minister and then President, heavy Government spending and borrowing got out of hand, but the crisis was disguised by foreign money flowing in for quick investment in treasury bills.

Under Mrs. Ciller, a 48-year-old economist who studied at the University of Connecticut and Yale and took over as Prime Minister in June 1993, things went into a tailspin. The Turkish lira plummeted. Investment fled. Inflation reached an annual rate of 150 percent. Gross domestic product fell by 6 percent in the first nine months of last year. And debt reached $62 billion.

Now, an International Monetary Fund austerity program is, at least nominally, in place. And the Government is half-heartedly pressing a privatization program to bring in $5 billion to retire some debt. But inflation has spawned widespread discontent.

The enthusiasm that greeted Mrs. Ciller's sudden rise to prominence, when she was instantly popular as the first woman to lead Turkey and someone who seemed tailor-made to appeal to the West, has disappeared. In its place are disillusionment and an almost personal dislike.

"She's a national disaster," said Mesut Yilmaz, who heads the opposition Motherland Party. "She doesn't have the experience, the ability or the team to run the country."

Her tenure, which is to last until elections in the fall of 1996, will be difficult because she faces considerable opposition. With parties spread across the spectrum, Turkey's political life is paralyzed because what would normally be the largest bloc of votes -- right of center -- is split between two parties, the Motherland and Mrs. Ciller's True Path. Insurrection Decade of Conflict With Rebel Kurds

The economic outlook and political stability of Turkey would improve with its entry into the European Union's customs bloc. That accession to the markets of the European Union, a struggle that Turkey began in 1963 and seems destined to continue long after former Soviet-bloc countries like Poland and Hungary are expected to gain admittance, involves more than Greek opposition.

The European Parliament recently passed a resolution condemning Turkey for its dismal human rights record, indicating that it would block the customs union accord unless Ankara improves its behavior. Most of the flagrant violations come from the brutal attempt to suppress Kurdish guerrillas who use terrorism to further their goal of secession in the southeast.

The war has gone on for 10 years and killed some 14,000 people, including several thousand civilians. The civilians are caught in the middle, suffering under the hard-line separatists of the Kurdish Workers Party but mostly under the security forces.

In a scorched-earth strategy to deny the guerrillas refuge and supplies from the local population, the security forces have razed 1,494 villages and forced civilians into protected Government villages, human rights groups say.

Police, army, paramilitary groups and special security forces carry out summary executions, disappearances and torture, according to Amnesty International, the State Department and the United Nations Committee on Torture.

Turkey denies committing violations on such a scale. Mrs. Ciller insisted, for example, that the villages were destroyed by terrorists disguised in army uniforms. But the authorities seem to court international opprobrium by actions like putting eight Kurdish members of Parliament on trial on charges of spreading "separatist propaganda."

Mrs. Ciller appeared open to negotiating the conflict when she became Prime Minister. But as the economy worsened and her popularity began to fall, she seems to have left the war entirely in the hands of the military. The military, a shadowy entity in Turkish life, stepped in to take over three times in the post-World War II years when it deemed that things had got out of hand.

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Turkish officials, including the few army officers willing to talk with journalists, insist that they are on the offensive. They say they are able to conduct winter operations and cut the supply lines of the Kurdish Workers Party from Syria, Iran and Iraq.

"The situation has improved quite a bit," said Sadi Erguvenc, a recently retired lieutenant general who commanded Turkish air forces as part of the American-led coalition in the Persian Gulf war. "The terrorists are out of the towns and villages. They have to confine themselves to the mountains."

But the price is high. Nearly 240,000 soldiers, about half of the army, are deployed in the southeast. The cost is above $500 million a year, or about $8 billion since the conflict began. That represents a substantial drain on the beleaguered economy.

And still, since the strategy relies on repression, and repression begets further resistance, the Government is unable to stamp out the rebels, who are thought to number fewer than 20,000. This spring, many here predict, they will resume their hit-and-run operations.

The main effect is to touch off a vast migration out of the impoverished southeast, reaching as high as two million over the decade since the conflict began. Turkey's 10 million to 15 million Kurds -- roughly a fifth of the population -- are now spread throughout the country, mostly on the outskirts of the big cities. Istanbul, already home to about 10 million and growing by about 500,000 a year, is the city with the world's largest Kurdish population, about 3 million.

As newcomers to the city, unable to find work in a contracting economy and bringing conservative rural values, they are ripe for recruitment under the fundamentalist banner. The fundamentalists court the Kurds and other poor people by saying Western influences brought the economy to ruin. The Kurdish insurrection will be solved, they say, when Islam is the governing principle of political life. Politics Rising Challenge To Secular State

As a way to modernization, secularism was a basic principle of the republic founded by Ataturk 72 years ago. It is a cardinal tenet of the governmental philosophy that bears his name, Kemalism. In a country where 98 percent of the population is Muslim, it coexisted with religion, which was a powerful force but confined to the private sphere and outside state affairs.

Over the last decade the steady gains of a religious revival and fundamentalism were visible. They could be seen in countless ways -- the number of women wearing traditional headscarves and veils, the workers' cafeterias closing during daylight fasting hours for the holy Muslim month of Ramadan and the construction of new mosques, some 1,500 a year.

Today Ankara and Istanbul are vast, throbbing and polluted urban sprawls, with a core of fancy shops and malls, movie theaters and restaurants patronized by middle-class men in loose-fitting business suits and women in designer dresses. Beyond the ministries and office buildings lies an outer ring of shacks slotted into hillsides. There, women draped in layers of dark clothing draw water from communal taps.

The contrasts are sometimes jarring -- a poster ad for the movie "Disclosure," taken down from bus stops in Paris because it is too risque, hangs on a busy thoroughfare; the call to prayer, blasted from the minarets, floats over the city and the mosques are filled.

The draw of fundamentalism was underscored by municipal elections last March. The Welfare Party doubled its share of the vote from local elections five years earlier. It ended up in third place with 19.3 percent of the vote, behind the right-of-center True Path Party and the conservative Motherland Party.

With the splintering factions of Turkish politics, the Welfare Party's showing was strong enough for it to win the mayoralties of Ankara, Istanbul and 29 other major towns and 400 smaller ones. About two-thirds of the country's population is in areas under the local control of fundamentalists. More recent public opinion polls put the party in first place, with as many as 22 to 25 percent of voters proclaiming allegiance.

Given Turkey's election laws, which Turgut Ozal as President revised to bolster the results for the leading party to overcome the paralysis of factionalism, it is possible to take over the Government with about 30 percent of the vote.

The Welfare Party is led by Necmettin Erbakan, an austere-looking 70-year-old who laces his speeches with diatribes against Jews and brooks little dissent. In 1974 he was Deputy Prime Minister. After the local elections he declared, "We will save Turkey soon, we will save Islamic unity, we will save humanity."

The Welfare Party promises to end corruption and impose a "just order." The newly arrived inhabitants of the outlaying slums, many of them Kurds displaced when their villages in the east were burned by security forces, read this as egalitarianism and a promise of jobs. They vote for the Welfare Party, or Refah Partisi in Turkish, to protest against the establishment, not necessarily to construct a theocratic state.

"Refah wants to bring about change," said Mahmut Cager, who lives with his wife, four children and other relatives in a two-room shack in the slums near Istanbul airport. "That is the main reason I am for it."

His home, with bare walls, has electricity but no water. Aside from a day now and then unloading goods in a warehouse, he has not had a job since arriving two years ago from Diyarbakir in eastern Turkey.

"No one else does anything for us at all," he said, as his wife poured tea and then withdrew to the other room. Fundamentalism Battle for Hearts, Minds and Votes

Those who are sanguine about the fundamentalists point out that there was always a strand of religious fervor in the many strands of political discourse. They note that the majority of Muslims in Turkey are Sunni, not Shiite as in Iran, and that certain sects are far removed from fundamentalism. And they insist that secularism runs too deep in society to be uprooted, or that democracy is held too dear.

In an interview, President Suleyman Demirel offered another assurance. "Assume they come to power," he theorized, sitting in the spacious office of the Presidential Palace. "For the time being they are a legal party. But if any party tries to attack the foundations of the republic, which is secularism, then it becomes illegal.

"Then our prosecutors should go to work and close the party." He paused and folded his hands. "What I am saying is, we have legal measures."

But adversaries of the Welfare Party believe that once in power, it will not surrender that power, even if defeated in a later election.

The fundamentalists are heavily financed, they say, probably initially with money from Saudi Arabia and Iran. Now they have a steady income from money sent home by the two million Turks working in Western Europe, who are often radicalized by their encounters with discrimination and by what they perceive as amorality.

No political machine can beat the Welfare Party when it comes to grass-roots organization. Women wearing headscarves go door to door in the slums proselytizing and meet intercity buses to take new arrivals in hand.

"They work hard with modern techniques," said Oktay Eksi, senior editorial writer for Hurriyet, Turkey's largest newspaper. "Their party apparatus is much more efficient. Now they control the municipalities and they use that to their advantage. If you can't pay your gas bill or your electric bill, they may call you in and discuss it and forgive it. Once they do that, you'll vote Refah forever."

"There are so many reasons people support them. Disappointment with the Government and the system plays into their hands. When a father sees a pornographic thing on TV, he says the Refah party is the one who will get rid of it. When people see corruption, they say, 'We will vote for Refah.' They have the myth of honesty and clean hands."

The "danger," said Ahmet T. Kislali, a sociologist, comes from the state-licensed religious schools, the imam hatip, which have mushroomed. There are now 506 of them, with 400,000 graduates and another 400,000 students in the pipeline.

"It's very stupid," Mr. Kislali said. "It's an army of militants raised by the Government itself. They are in the ministries, in the prefects, even in the offices of public prosecutors and judges."

As a counteraction to the surge of fundamentalism, there is a revived interest in Ataturk. His portrait appears on buttons worn everywhere. Lectures on Kemalism are packed and books about him sell out. Two years ago the Association to Promote Kemalist Ideas, a private group, had three chapters and 114 members; now there are 111 chapters and 11,000 members.

Every day, lines of schoolchildren wait to enter his gigantic hilltop mausoleum, which dominates the capital and is lighted at night like a beacon to his legacy.

But the interest in Ataturk does not seem to match the interest in fundamentalism.

"We now have three million registered party members," said Oguzhan Asilturk, the Welfare Party's secretary general. "By the end of the year we think we will have four million." He said the party's strength was that it was seen as "a defender of freedoms" and that it was aiming for an absolute majority.

If the party came to power, he said: "It doesn't mean the others would be obliged to live like Muslims. It would be up to each person to chose the way he wants to be."

Asked if the party would step down if it were to lose, he laughed and said, "A lot of people are asking us that question."

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A version of this special report appears in print on March 2, 1995, on Page A00001 of the National edition with the headline: Uneasy Crossroads -- A special report.; Discontent Seethes in Once-Stable Turkey. Order Reprints|Today's Paper|Subscribe